"Worse than the dot-com era": Michael Burry bets on a drop in Micron's stock

Renowned short seller Michael Burry, who served as the inspiration for the protagonist in the movie *The Big Short*, has opened a short position in Micron. On his blog, Cassandra Unchained, the investor reported that he had shorted the memory manufacturer’s stock, which hit a new all-time high in June. Burry believes the market has overvalued the cyclical company too much based on expectations of a memory shortage and demand from the AI sector.

“Yesterday, I opened a short position in Micron at $1,051.87,” Burry wrote on July 2. On that day, the company’s stock fell more than 5% and closed at $975.56.

Just six days ago, Micron’s stock hit a new record high, rising above $1,200. Investors were impressed by the company’s quarterly report, which showed a fourfold increase in revenue and a 13-fold increase in profits. Micron is benefiting from the huge demand for memory chips needed by the artificial intelligence industry. Following the report, several major investment banks immediately raised their forecasts for the company.

In his blog, Burry points out how much Micron's current price has risen above the average over the past 200 trading days.

During periods when the price exceeded the 200-day moving average by more than 100%, a 30% decline over the following year was virtually inevitable, the investor writes. His analysis showed that over 42 years, Micron’s stock has experienced 34 such declines: the stock rises sharply during periods of memory shortages and falls just as sharply when the cycle reverses. According to Burry, Micron’s past crashes unfolded fairly quickly: the stock often went from peak to trough in a matter of months. In some cases, the decline took about 2.6 months; in more protracted cases, about 7.4 months.

In 2026, Micron’s stock price deviated further from its long-term average than ever before in recorded history—even higher than at the peak of the dot-com bubble, writes Burry. Over the past year, the stock has risen 700% amid the hype surrounding chips and AI.

Investors have fallen into several psychological traps at once, according to Burry: they hear that the company’s entire product line has already sold out, and they follow the crowd, believing that such an opportunity cannot be missed. Their optimism is fueled by analysts: 52 out of 57 Wall Street analysts covering Micron have “buy” ratings, with no “sell” recommendations at all.

He points out, however, that Micron no longer dictates the cycles in the memory sector but is now following its competitors. Due to aggressive capacity expansion in South Korea, the company has to spend more on equipment and manufacturing.

Burry considers Micron a weak business over the long term. He looks not only at the stock’s growth but also at how much the company has earned: over 42 years, Micron’s median return on invested capital (ROIC) was 4%, and its return on equity (ROE) was 7%. According to Burry, these are “terrible” metrics for a company whose cost of capital is well above 10%.

He also points out that Micron's financial results were consistently in the red: the company reported negative returns on assets, equity, and invested capital.

According to the short seller, the market is currently valuing Micron significantly higher than its historical average: the company’s market capitalization is 14.2 times its annual revenue, compared to a 42-year median of 2.2. He isn’t focusing on current earnings—in a cyclical business, they can be high at the market peak and fall rapidly after a reversal.

Michael Burry also reported that he had increased his long positions in five companies. He bought additional PayPal shares at $45.31. Following a sharp decline, the stock is trading below its long-term average, Burry writes, noting that the market is valuing the fintech company lower than in previous years—both relative to its revenue and its tangible assets. Burry opened a position in PayPal in April, betting on a recovery in the stock following the “soft apocalypse”—and has increased his position several times since then.

Burry bought additional shares of mortgage giants Fannie Mae and Freddie Mac at $6.15 and $5.69, respectively. He considers both stocks to be highly volatile: over their long history, their prices have risen and fallen sharply, so he assesses their current levels in light of past sharp movements—and is holding onto both due to uncertainty, as it is unclear which of the companies will prove to be stronger.

In addition, Burry increased his stake in the grocery retailer Sprouts by buying additional shares at $89.33 and in the pharmaceutical company Zoetis at $74.8.

This article was AI-translated and verified by a human editor